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Chapter 18. Building Investment Formulas > Working with Interest Rates

Working with Interest Rates

As I mentioned in Chapter 17, the interest rate is the mechanism that transforms a present value into a future value. (Or, operating as a discount rate, it's what transforms a future value into a present value.) Therefore, when working with financial formulas, it's important to know how to work with interest rates and to be comfortable with certain terminology. You've already seen (again, in Chapter 17) that it's crucial for the interest rate, term, and payment to use the same time basis. The next sections show you a few other interest rate techniques you should know.


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